From the Hill - From NAFTA to USMCA
October 2nd, 2018 - 10:41am
After months of negotiations and a seemingly endless series of false deadlines, negotiators have hammered out a new trade agreement between Canada, the USA and Mexico. The new agreement (called the United States-Mexico-Canada Agreement, or USMCA for short) will create winners and losers, of course, and the general consensus is that the USA did quite well, while Canada took some losses.
Some of the general areas of disagreement were supply management, auto exports and dispute resolution mechanisms. The Canadian dairy sector was particularly targeted by the US, since it is operated under a supply management system that creates a stable market for producers. American dairy farmers often suffer from overproduction, resulting in family farms going broke because they have nowhere to sell their milk. Some of those farmers complained that they couldn’t export to Canada, even though that might only be a temporary fix for their production problems. In the USMCA, Canada is allowing US dairy farmers access to just over 3 percent of our market. That may not seem like a lot, but we’ve done the same thing in the last 3 trade agreements we’ve signed, so the total is over 10 percent.
At the heart of any good trade agreement is a way to settle disputes between the countries involved. NAFTA had a couple of dispute resolution mechanisms, one of which Canada wanted to keep, and another that many would be happy to see the end of. The keeper was Chapter 19, the nation to nation dispute resolution mechanism under which a country that felt another was playing unfair could take their concerns to a panel made up of members of both countries. Canada used Chapter 19 provisions to fight the USA during past softwood lumber disputes. And we used it very successfully, winning every time. Perhaps because of this record, the USA repeatedly said they wanted to get rid of Chapter 19.
Chapter 11, on the other hand, allowed corporations to take countries to court if they felt that a country had changed the rules of trade to their disadvantage. These are the so-called investor-state dispute resolution mechanisms, or ISDR for short. For example, a water company could sue Canada if they felt we were unfairly limiting water exports for environmental reasons (and this has indeed happened). Canada has not fared well under Chapter 11, and has lost over $300 million in damages over the years through those court actions. Many Canadians feel that ISDR provisions unfairly limit the sovereignty of countries, hand-cuffing their ability to manage their resources and environment the way they see fit. The NDP has always been against Chapter 11-type provisions in trade deals for those reasons.
The USMCA keeps Chapter 19 more-or-less intact (though now it will be known as Chapter 10), but will see the phase-out of Chapter 11. So Canada can be happy about the results of dispute resolution negotiations at least.
Locally, the big loser in the new agreement might be the wine industry. I had repeatedly asked the government not to use the wine industry as a bargaining chip to save dairy or the automotive industry, but it appears that is what happened. Canadian negotiators caved to American demands to allow American wine in what are now Canadian-only wine aisles in supermarkets. These grocery store sales were very important to local wineries, particularly small operations, but this may be in jeopardy if sales of wines from huge US companies are allowed along side Canadian wines.